Italy

Italy

Veteran steering O&M drive in recovering market

19 March 2018
by Heather O’Brian

ITALY: As managing director of Nordex Italy for ten years, and general manager of Vestas Italy for eight years before that, Francesco Paolo Liuzzi has seen Italy's wind energy sector grow from infancy to maturity, with capacity expanding from a few hundred megawatts to its current level of about 9.5GW.

Switching sides… After 18 years with major OEMs in Italy, Francesco Paolo Liuzzi has joined a service provider

Now he is using that experience in his new role as managing director of Italian service provider Energy System Services (ESS), which was acquired by BayWa’s renewable-energy division at the end of last year as part of the German group’s effort to expand its services offering.

The acquisition followed the company’s purchase of Green Hedge Operational Services in the UK in early 2017, and expansion into new markets in Australia, Africa and central America.

ESS is a multi-brand service provider for about 200MW of Italian renewable-power plants, mainly wind, but it also builds wind farms and boasts expertise in high- and medium-voltage substations.

The firm was set up in 2005 as growth in the Italian wind sector began to accelerate. Company founders Ludovico Lombardi and Mario Palumbo have remained on board and are working alongside Liuzzi.

The acquisition complements BayWa’s other Italian operations and maintenance (O&M) operations, involving the servicing of a further 570MW — mainly solar PV plants — and makes it the largest independent renewable service provider in the country.

Italy is a key market for developing and servicing projects for the company, which globally is responsible for O&M on some 3GW in renewable-energy plants, divided roughly equally between wind and solar.

Growing demand

The group’s Italian expansion comes as demand for services from independent providers is on the rise in the country, particularly from smaller independent power producers, as a growing number of turbines move out of guarantee periods and incentives expire.

Turbine makers may also be able to save money by farming out more routine operations to independent players, Liuzzi points out.

Yet he expects management of control systems, the algorithms of which are closely guarded business secrets, and other technologically complex turbine components to remain in the hands of the turbine manufacturers.

As is the case in other developed markets, the focus on O&M and reducing the cost of energy produced in Italy has increased as incentives for wind — now awarded through a competitive auction process — have been cut to a level close to market prices for power.

At Italy’s last tender for fixed tariffs in December 2016, all winning bids came in at €66/MWh, or a 40% discount on the tender reference price.

That is about one third the price on offer in Italy a decade earlier, although the reduction in prices has been balanced in part by an extension of the incentive period.

"I wouldn’t say so much that clients have become more demanding, but, like the market, they have also become more mature and they are now more focused on quality," says Liuzzi.

He says the market for O&M services has changed significantly in recent years, particularly in relation to maintenance contracts.

"There typically used to be long-term, all-inclusive contracts, but now they tend to be shorter, with the turbine manufacturer covering just the first few years of operations," he explains, adding that power producers and wind-farm owners pushed for the change, sometimes because their portfolios grew large enough to justify bringing O&M in-house.

In Italy, this strategy was pursued by energy group ERG, which now operates more than 1GW of wind farms in the country, and has increasingly handled O&M internally.

Investment funds are one exception to this trend, though, as they often lack the necessary O&M expertise and tend to prefer long-term contracts with the manufacturer.

At the start of his term at ESS, Liuzzi says his priority is focused on offering a truly global service to clients, "ranging from minor maintenance to major programmed maintenance contracts and predictive maintenance".

He notes that servicing also entails providing 24-hour remote monitoring and advice on optimising a plant’s operation.

ESS has a research team on hand to identify eventual revamping opportunities when this is a suitable option to boost output and reduce operating costs.

Future prospects

Liuzzi is positive on prospects for further growth of wind energy in Italy and, by extension, for service providers.

He envisages growth taking place both through repowering and greenfield projects, despite perennial obstacles such as a lengthy and, at times, complex authorisation process.

"Even with these problems, we’ve managed to install nearly 10GW in Italy," he says. "I think growth is obligatory, both because there are 2030 targets and because we need to keep up with other industrialised countries.

"To be competitive, a country must have a competitive energy system, and by now, the cost competitiveness of wind energy is widely recognised."